AT&T To Lease, Sell Wireless Towers To Crown Castle In $4.85 Bln Deal

(RTTNews) - Telecommunications giant AT&T Inc. (T) said Sunday that it has agreed to lease the rights to about 9,100 of its company-owned wireless towers as well sell about 600 towers to Crown Castle International Corp. (CCI). AT&T will receive about $4.85 billion in cash up-front proceeds for the deal.

Under the definitive agreement, Houston, Texas-based Crown Castle will have exclusive rights to lease and operate the 9,100 AT&T towers, with the average term of the lease rights being about 28 years.

As the leases expire, Crown Castle will also have the option to purchase the towers for aggregate option payments of about $4.2 billion. The two companies expect the transaction to close in the fourth quarter of 2013, subject to customary closing conditions.

Ben Moreland, President and Chief Executive Officer of Crown Castle said, "We are very pleased with our agreement with AT&T, which strengthens our position as the largest provider of shared wireless infrastructure in the U.S., which we believe is the largest, fastest growing and most profitable wireless market in the world. Consistent with our focus on the top 100 U.S. markets, nearly half of the AT&T towers are located in the top 50 markets, where we expect the majority of network densification and upgrade activity to occur."

Dallas, Texas-based AT&T said it will sublease capacity on the towers from Crown Castle for a minimum of 10 years for a monthly rent of $1,900 per site, with annual rent increases of 2 percent. The company will also have the option to renew the sublease for up to a total of 50 years.

In addition, AT&T will have access to additional space on the towers for its future use, subject to certain restrictions. The company expects the additional capacity to help it continue to meet growing demand for mobile Internet services.

During the period of the leases, Crown Castle will have the right to sublease other available capacity on the towers to additional tenants and believes the AT&T towers have sufficient capacity to accommodate at least one additional tenant per tower.

Bill Hogg, Senior Vice President of Network Planning and Engineering, AT&T Services Inc., said, "This deal will let us monetize our towers while giving us the ability to add capacity as we need it. And we'll get additional financial flexibility to continue to invest in our business, maintain a strong balance sheet and return value to our shareholders."

AT&T said it expects no significant impact to its financial results from the transaction. The company is slated to announce its financial results for the third quarter on Wednesday, October 23.

Meanwhile, Crown Castle said it estimates the AT&T towers to contribute about $245 million to $255 million to its adjusted funds from operations, or adjusted FFO, before financing costs in 2014. Further, the company expects the transaction to be 5 percent accretive to its long-term adjusted FFO per share. The company plans to release its financial results for the third quarter on Monday, October 21, 2013.

Crown Castle noted that the portfolio is urban-centric, with nearly 50 percent of sites in top 50 U.S. markets. The company believes the transaction will strengthen the credit quality of its revenue, with pro forma 84 percent of its consolidated site rental revenue coming from the Big 4 U.S. wireless carriers.

Crown Castle expects to fund the transaction with cash on hand as well as equity and debt financing, including borrowings under its revolving credit facility.

Following the contemplated transaction, the company will continue to be the largest wireless infrastructure operator in the U.S. with about 40,000 towers throughout the U.S. as well as extensive small cell operations in over 50 markets.

T closed Friday's trading at $34.61, up $0.17 or 0.49 percent on a volume of 30.47 million shares. CCI closed Friday's trading at $75.96, down $0.85 or 1.11 percent on a volume of 3.26 million shares.